Turkey's economy plummets amid United States sanctions

Raquel Nash |Thursday, August 16, 2018

Andrew Brunson centre was released from prison but put under house arrest last month. If found guilty he faces 35 years in jailMUSTAFA KOPRULU EPA

Turkey needs to reconcile with the United States in order to stop the ongoing depreciation of the Turkish lira, which is unlikely to be possible without the release of detained U.S. pastor Andrew Brunson.

"The tariffs are specific to national security", she said, without specifying the nature of the national security concerns.

White House press secretary Sarah Sanders said the USA had seen "no evidence that Pastor Brunson has done anything wrong". "If they back the American position on Turkey tariff penalties, then they lose Turkey".

'If (the United States) have the iPhone, there's Samsung on the other side, ' he said, referring to USA giant Apple's iconic phone and the top South Korean brand. Turkey's exports to the United States a year ago amounted to $8.7 billion, making it Turkey's fifth-largest export market.

A court in Turkey has rejected an appeal by an American pastor, who faces terrorism charges, to be released from house arrest and for his travel ban to be lifted. This move is created to make it more hard for Turkish institutions to buy and sell derivatives in foreign markets and to prevent investors betting against Turkish assets.

Turkish Vice President Fuat Oktay said that the rises were ordered "within the framework of reciprocity in retaliation for the conscious attacks on our economy by the U.S. administration". While many in the country believe the crisis is the fault of the US, even though experts have been warning of danger signs in the economy for months, Williams says some Turks do blame authoritarian President Erdogan for the crisis.

Turkey's downtrodden currency, the lira, surged Wednesday morning hours after the country's government levied significant tariffs against American goods in response to what it has called "deliberate attacks" against its economy.

In a decision announced in the Official Gazette, Ankara said it was imposing extra tariffs on imports of products including rice, vehicles, alcohol, coal and cosmetics.

Turkey announced Wednesday it is increasing tariffs on imports of certain U.S. products, escalating a feud with the United States that has helped trigger a currency crisis.

In the wake of United States sanctions on Turkey, President Recep Tayyip Erdogan reached out to German Chancellor Angela Merkel to point out that it's in Germany's interest for Turkey to have a strong economy.

Inflation rate drops to 11.14% in July-NBSThere was a sharp drop in the rate of inflation last month, and it's now at its lowest level since the start of previous year . Prices for computers games - which are often volatile - and transport fares pushed up inflation in July.

Ankara's central bank took actions to reinforce the currency on August 15 and squeezed the Turkish lira's liquidity from the market. "Russian Federation is quite a capacious market for Turkish goods", said Yaroslav Lissovolik, Program Director with Russia's Valdai Discussion Club, a Moscow-based think-tank. On Tuesday, he said Turkey would boycott US electronic products.

Turkey's weakened currency, the lira, plunged by a full 20 percent in response.

In a televised speech on Friday, he called on Turkish citizens to exchange foreign currency and gold for lira, calling it an "economic war".

Yet Erdogan is opposed to raising Turkey's own interest rates, despite the measures of the industrialized democracies and an inflation rate in Turkey of almost 16 percent.

Michael Hewson, chief market analyst at CMC Markets UK, warned the Turkish tariff hikes risked provoking a new reaction from Trump and ultimately adding to downward pressure on the lira.

Mr Erdogan has accused the United States of trying to "bring Turkey to its knees through threats over a pastor".

On Wednesday night, a group of Istanbul taxi drivers hung Turkish flags on their cars and sounded their horns as they drove in convoy to the USA consulate, laying a black wreath there in protest, the Demiroren news agency said. Other foreign policy experts worry that the rift could hurt cooperation between the USA and Turkey in its fight against the Islamic State in Syria.

The collapse, which intensified this month and triggered contagion that spread across emerging markets, is making it much more costly for businesses to refinance at least US$16 billion in bonds denominated in foreign currencies that are due by year-end, according to calculations by Bloomberg. "If they have iPhones, there is Samsung on the other side, and we have our own Vestel here", he said, referring to the Turkish electronics company, whose shares rose 5 per cent.

Erdogan's government insists the Turkish judicial system must be respected, and Brunson's fate now rests with a court in Ankara that is expected to rule on the American's legal appeal for release this week. "But there will be a price [which] those who're waging an economic warfare against Turkey will also pay".

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